Loading Home Loan Affordability Calculator…
The traditional conservative guideline: 28% of gross income on housing, 36% on all debt.
Car loans, student loans, credit card minimums, child support.
Charged on the loan while you owe more than 80% of the price.
$287,285
A loan of $247,285 on top of your $40,000 down payment.
The limit here is your housing ratio: it caps housing at $2,100 a month. Interest is compounded monthly (united states).
The most a rule will permit, which is not the same as the most you should spend. Every ratio here is measured against gross income, so a payment that reads as 28% of what you earn is a considerably larger share of what reaches your account once tax and payroll deductions come out. Property tax, insurance and any condo fee stay at the figures you entered, and all three tend to rise over the years while a fixed-rate payment does not. Nothing above sets money aside for maintenance, which a house needs whether or not the budget has room for it.
This is what a rule of thumb allows, not what a lender will offer. Every limit here can be exceeded with a strong credit file, reserves or a larger down payment, and none of them know what your life costs. Closing costs, moving and furniture come on top of the down payment.
Affordability is decided by whichever rule your lender applies, and the rules disagree by a hundred thousand dollars on the same income. This tool implements five of them rather than picking one and calling it the truth.
Take a $90,000 income, $550 a month of existing debt payments, $40,000 down, a 6.5% rate over 30 years, property tax at 1.1%, $1,800 a year of insurance and mortgage insurance at 0.6%. The five rules answer:
The spread between the most and least generous is over $150,000 on identical facts. The Canadian figure is priced at 8.5% rather than the 6.5% typed in, because the stress test asks whether you could still pay at your rate plus two points. The payment you would actually make is $2,374, comfortably under the $2,750 allowed.
The monthly allowance comes first, then the price is solved backwards from it — which is harder than it sounds, because two of the costs inside that allowance depend on the price. Property tax is a percentage of the value and mortgage insurance a percentage of the loan, so the equation has the answer on both sides. It is rearranged and solved directly rather than guessed at.
Mortgage insurance also makes the cost curve jump rather than bend: one dollar over the 80% loan-to-value line and a new monthly charge appears from nothing. On a $120,000 income with $85,000 saved, the answer is exactly $425,000 — the largest price that keeps the deposit at 20% — and the cost there is $2,689 against an allowance of $2,800. The unspent $111 is not an error: anything more expensive triggers insurance costing more than the allowance has left.
Every rule here works from gross income — before tax, before pension contributions, before health insurance — and none of them know what your life costs. Childcare, a long commute, medical bills and supporting a relative are all invisible to a debt-service ratio, and all of them come out of the same money.
The output is a ceiling rather than a target. Borrowing the maximum leaves nothing for a broken boiler, a lost job or a rate reset — and closing costs, moving and furnishing arrive immediately after the deposit, when the account is at its emptiest.
That is the stress test. Federally regulated Canadian lenders qualify a borrower at the greater of the contract rate plus two percentage points and 5.25%, so the tool sizes the loan at that rate while showing the payment you would really make.
Car loans, student loans, personal loans, the minimum due on credit cards, child support and alimony. Utilities, groceries, insurance premiums and anything you could stop paying tomorrow are generally not counted, which is exactly why the ratio flatters you.
It caps the size of the debt rather than the size of the payment, so the answer does not move every time interest rates do. Affordability at the payment level is then checked separately, including against a higher stressed rate.